To Innovate, Leave Something to Chance

An old classmate of mine since primary school days has an illustrious career in construction project management. Today, he is the managing director of a leading development company listed on the Malaysian stock exchange. I once asked him what is the single most important success factor in construction project management. "Have a very good checklist, and check it religiously", he said.

What he said resonates with several other experienced project managers I spoke with in other fields such as IT project management and event management. Their common mantra -- if you want flawless execution, leave nothing to chance.

Leave nothing to chance -- this mantra has served Singapore well. Indeed, over the years, Singapore has earned a reputation for efficiency and dependability in project execution. Whether it is physical infrastructure development projects like airport and public transport, or events like the IMF convention or F1, our project planners and managers have done well when it comes to executing according to plan.

But this formula for success is only applicable when you are dealing with projects that have two characteristics -- (1) the end-targets can be well-specified ahead of time, and (2) the means to achieve the targets are also known and well-specified. In other words, you know where exactly you want to go, and you know the available roads and means (transport vehicles, fuels etc) you need to take to get there.

Unfortunately, these conditions do not apply when you are embarking on an innovation journey. When you are trying to innovate, you may know what the end goal is (e.g. kill the cancerous cells but leave normal cells unharmed), but you do not know how to get there; or you may have a fantastic new tool, but don't know what you can do with it. Often, you have incomplete knowledge of both.

Much of the innovation literature tells us that successful innovations often come about serendipitiously, i.e. the innovative ideas are often discovered by accidents and for purposess not originally pursued. Chance encounters and unexpected occurences (accidents) feature prominently as impetus for such innovative breakthroughs as the discovery of penicillin, insulin and viagra and the invention of microwave oven, vulcanized rubber, inkjet printer and paypal, just to name a few. However, this runs counter to the mindset of leaving nothing to chance. In the latter mindset, everything is regimented to achieve the planned tasks at hand, and no wandering out of the defined activities is allowed. The chance of accident has already been minimized by meticulous planning, and even if it still happens, contingent plans have already been specified to get you back on track as quickly as possible.

To improve your chance of coming up with something really innovative, however, you need to do the opposite by leaving something to chance. Allow some time to go on an explorative mode rather than your routine exploitative mode -- i.e. broaden your knowledge search to less familiar territories instead of stomping around familiar grounds . Give your ideas room to mutate by reading and trying things outside your normal routine, and having chance encounters with people you normally do not talk to. And when something unexpected does happen, sit back to ponder what it may mean and explore where it may lead you, rather than hurrying to get back on track with whatever you were originally pursuing.

To leave something to chance, you have to leave some time to chance. One of my favourite quotes is a line I read many years ago in a Princeton University brochure when I was looking for universities to apply. It went something like this -- "There is value to time that has no direction, and that can go in any direction." I have taken to heart this advice over the years.

New opportunities are staring at our face everyday. But most of us are so focused on what we are doing (the rate race...) that we miss seeing them. Are you leaving enough time in your life for chance exploration ?


NOTES

For an enjoyable account of serendipitious discoveries in science, read Royston M. Roberts: Serendipity: Accidental Discoveries in Science. Wiley, 1989.

For a more recent listing of notable serendipitious discoveries and innovations, see the Wikipedia entry on Serendipity.

Exploration vs. exploitation is a central conceptual construct (first introduced by J.G. March) in the innovation management and organization science literatue. If you like to learn more about the distinction between the two modes of innovation and their impact on firm performance, you can read this academic journal article of mine)

Promoting entrepreneurship development in Singapore: Ideas for the Economic Strategies Committee?

As some of you may be aware, the Singapore government has recently established a high-level, inter-ministerial Economic Strategies Committee (ESC) to develop and recommend strategies to grow Singapore’s future as a leading global city in the heart of Asia. You can visit the ESC website to get more details on the composition, scope and objectives of the ESC, which aims to put forward its key recommendations in January 2010 and will release its full report by mid-2010.

One of the sub-committees (Sub-committee 2) set up under the ESC is tasked to look into "Developing A Vibrant SME Sector And Globally Competitive Local Companies". Co-chaired by Mrs. Lim Hwee Hua (Minister in the Prime Minister’s Office and 2nd Minister (Finance and Transport)) and Dr. Ricky Souw (CEO, Sanwa Group and President of Singapore Precision Engineering and Tools Association), this sub-committee will recommend strategies to:

* Develop a vibrant landscape of entrepreneurial activity
* Foster the growth and internationalisation of Local Globally Competitive Companies
* Strengthen synergies between small and large enterprises

The above issues are highly relevant to the future development of the entrepreneurial ecosystem of Singapore. In addition, there are several other ESC sub-committees that may cover issues of relevant interest to the entrepreneurial community, including Sub-committee 1 (Seizing Growth Opportunities), Sub-committee 4 (Growing Knowledge Capital) and Sub-committee 5 (Making Singapore a Leading Global City).

I would like to strongly encourage everyone in the entrepreneurial community of Singapore to contribute your ideas. You can do so directly by going to the online consultation page of the ESC website to submit your suggestions and feedback. If you like to share your ideas with others in the community so as the solicit comments and feedback from others, can I suggest that you also submit your thoughts as a response to this blog post -- hopefully we can then generate a healthy online discussion among the community.

I happened to be involved in a task force set up within NUS to provide inputs to the ESC, and so will be more than happy to not only participate in this online discussion myself, but also to champion some of the best ideas emerging from this online discussion (with appropriate attribution of course) through this channel as well. I look forward to your active contribution !

The virtue of diversity

It's been a few months since I last blogged. This is partly deliberate, as I tried to experiment with diversifying the media channels to share my ideas. Besides the usual academic journals and conferences that I continue to pursue as an integral part of my day job as a professor in NUS, I have gone back to writing for the traditional print broadcast media (2 articles in the local newspapers & 2 in niche overseas magazines), done 2 overseas radio interviews, taken on more overseas speaking engagements than perhaps I should have (Hong Kong, Paris, Penang and Barcelona...), tried a couple of international webinars, and dabbled in more social networking sites (besides Linkedin, I've added Facebook, Academia, and Twitter).

In reflecting on my experiment with diversifying media outlets over the last few months, I came to 3 basic conclusions. First, different media are good for different purposes, so maintaining a mix of media presence is necessary. The local dailies remain the most effective in local reach; I have acquaintances whom I haven't been in touch for years contacting me after reading my articles in the local newspapers. Face-to-face speaking engagements are still the best mechanisms for reaching new, high power contacts; I not only generated a number of instant consulting/ collaboration invitations from these, but a steady stream of referrals as well. Social networking sites are good for consolidating prior contacts, although not that good for generating new ones.

Second, the diverse channels do have complementary effects. People who met me face-to-face at my speaking engagements subsequently visited my Linkedin homepage and asked to be connected. People who read my newspaper articles searched and downloaded my academic publications online.

Last, but not least, openness to exploring diverse channels is important to develop the kind of novel learning & discovery experiences that lead to what Johansson has aptly called the intersection ideas in his book, The Medici Effect. Basically, intersection ideas are novel ideas that emerge from combining and synthesizing ideas from diverse & unconnected sources, vs. directional ideas that incrementally refine or extend existing ideas within a single field or paradigm. As he persuasively argued in his book, truly radical innovations tend to come from intersectional ideas, not directional ideas.

Some of the more intriguing ideas I have generated over the last few months have emerged from the less common channels I experimented with. For example, I spoke in April at a World Bank-INSEAD forum in Fontainebleau (near Paris) which was primarily targeted at innovation policy makers & practitioners from the former Soviet Union. Although I had spoken in Estonia, Hungary and the Czech Republic and lectured senior Kazakhstan officials before, I claim no real expertise in these transitional economies, and had no intention to do research or make angel investment there. I was amazed, however, to find people from some of these economies who have actually read my stuff, and one of them raised interesting questions that gave me new thoughts about the role of entrepreneurship in economic development. The interactions also convinced me how important Russia is, even though no one from Russia was even there. Two serendipitous outcome emerged: one, I now have Moscow as one of the dots I plan to connect in the near future, and two, I'm now doing new research on the role of entrepreneurs as differentiation agents in complexity economics.

The bottom-line, then, is that if you want to have an innovative edge in what you do, try pursuing diversity of information channels. Explore more dots. You may be surprised by the connections that can emerge.

"Innovated in Asia" – Globalization’s Next Tidal Wave

[NOTE: An edited & abbreviated version of this post appears in Singapore's Straits Times today]

A key feature in the last two decades of globalization of the world economy has been the massive shift of production activities to Asia. This “Made-in-Asia” wave is most pronounced in the case of electronics/IT manufacturing activities: my research shows that non-Japan Asia accounted for only 8% of world production in 1985, but increased its share to one-quarter by 2000 and as much as 45% by 2007.

I predict that the next twenty years will see a similarly massive shift of innovation activities to Asia. Just as the “Made-in-Asia” wave of the last twenty years has profoundly re-shaped the global economy and indirectly contributed to the massive trade imbalance that is one root cause for the current financial crisis, this “Innovated in Asia” wave will have an even more profound impact on the world.

In many ways, innovation has been among the least globalized economic activities in the world economy, with most forms of innovation activities – whether measured in terms of R&D expenditure, scientific publications, intellectual property (IP) creation, and sales of new products embodying such IPs – still being dominated by North America, Western Europe and Japan. But the picture is changing fast. For example, my own research shows that, while only 0.6% of the cumulative number of patents granted by the US Patent Office between 1976 and 1990 involved a first inventor based in non-Japan Asia, this had increased to 4.1% for patents granted over 1991-2000, and 9% for the 2001-2007 period. While indigenous Asian firms have been a strong driver of this shift, so too have global high tech firms from the western nations: my research shows that, among the top 500 global firms in terms of US patent ownership, over 6% of their patents granted since 2000 were invented in non-Japan Asia, vs. just 0.1% for the period 1976-90.

The surge in innovation activities across Asia is not evenly distributed. The three Asian NIEs (Korea, Taiwan and Singapore) led the first wave of growth in the late 1980s; today, these three NIEs have all spent a higher share of their GDP on R&D than UK and France. Since the late 1990s, China (and to a smaller extent India) have been leading the second wave of growth. Although China’s R&D expenditure to GDP ratio is still less than 1.5%, after adjusting for Purchasing Power Parity (PPP), China is now spending almost as much as Japan in R&D.

The drivers for the recent surge in innovative activities in Asia are many. One is the shift towards Made-in-Asia itself: before one can learn to innovate, one needs to learn how to master the use of existing technology first. The massive growth of increasingly technology-intensive production activities in Asia – especially manufacturing in China and software programming in India – has thus built the foundation upon which many innovative activities can be carried out. While it is true that much of these new innovation activities are still incremental in nature, they do contribute significantly to enhancing Asia’s competitiveness.

Another contributing factor has been the dramatic spread of internet access around the globe and its substantial impacts on lowering the geographic barriers to information flow. This not only shortens the diffusion time-lag of new knowledge from the advanced nations to Asia, but also hastens cross-border research collaboration. Increasingly, Asia is becoming integrated not just in terms of physical supply chains linking components production to final assembly, but also in terms of product design and its manufacturing. For example, two of the top three creators of US patents in China are Taiwanese firms, which also have substantial manufacturing operations in China.

A third factor is the surge in educated talents across Asia. Today, Asia graduates more technically trained manpower than Western Europe and USA combined. Although much of the tertiary-education in Asia remains of lower quality, peaks of excellence are emerging as many Asian governments increasingly pursue policies to make their leading universities globally competitive.

I predict that the current global economic recession will hasten the shift of innovation activities to Asia. Firstly, the severe financial meltdown will accelerate the return flow of the Asian diasporas in the advanced economies back to Asia. Already, many Asian high tech entrepreneurs are leaving Silicon Valley to look for venture funding and market opportunities back in Asia.

Secondly, the market demand for innovation will shift more rapidly to Asia. As highlighted by my other NUS Business School colleagues in earlier articles, while poor governance of the banking systems in the US and Europe has been the proximate cause for the dramatic collapse of the global financial system, it is the massive build-up of huge and rising imbalance in global financial flows that makes the current global system unsustainable.

In essence, while easy consumer credit has fueled the demand for a wide range of consumer goods-related innovations in the rich economies, over the next decade, I believe that we will see a substantial re-balancing of the global economy, with domestic market growth in Asia becoming a much bigger part of world demand.

This will in turn not only drive more innovations in Asia, but more importantly, it will also transform the nature of innovation activities on a global scale. “Innovated in Asia” will not be just about shifting innovation activities to Asia; it will be about creating new organizational models and financing methods of innovation to create new products and services that are more appropriate for the Asian socio-economic context. For example, innovation to meet the needs of low-income population in emerging economies – what C.K. Prahalad had called the “bottom of the pyramid” – will feature more prominently in the future. So will the “Open Innovation” model, especially the use of open source technology for disruptive cost innovation.

Bangladesh pioneering micro-financing. The Aravind Eye Hospital in India overtaking the leading hospitals in UK in eye surgery operations. Korea’s NCSoft and China’s Shanda dominating the global online game industry. Taiwan’s Giant becoming the world’s leading bicycle innovator. And Slumdog Millionaires winning the Oscars. These “Innovated in Asia” wavelets will gather momentum and coalesce into tidal waves over the next two decades.

What's Wrong (or Right) about Singapore's Entrepreneurial Ecosystem, Part II

I would like to thank the dozen or so of you who sent me emails to share your views on Singapore's entrepreneurial ecosystem (also the five who left comments on my blog). While many of you have (rightly) highlighted the lack of early stage finance (angel investors, early-stage venture capitalists) as a major impediment in Singapore, I would like to highlight another factor that may be just as important, if not more so -- the lack of advanced firms that provide the seed-bed for the development of advanced skills and knowledge, and that are willing to try adopting new, advanced but unproven technology from small start-ups, i.e. serving as lead-users to other start-ups. Indeed, in certain business sectors where such advanced firms were present, Singapore had actually witnessed sizable emergence and growth of start-ups, contrary to the perception that Singapore's entrepreneurial ecosystem has been uniformly weak for start-ups in general.

From the mid-1980s to the late 1990s, Singapore had actually experienced significant start-up growth in one sector -- the supporting industry to the hard-disk drive (HDD) industry. If you examine the number of companies that IPOed in the 1990s, you will find a sizable number came from this sector -- ranging from precision engineering firms like MMI, Brilliant and Seksun to contract manufacturing firms like Natsteel Electronics and JIT (both had since been acquired by others). Others like facility engineering services firms Perdana Consulting had also done well, even though they did not go public. These firms were arguably technology-intensive, and some of them were able to compete globally, although nearly all of them started by serving the major HDD assemblers located in Singapore from the mid-1980s -- Seagate, Conner, Maxtor, Western Digital, etc. Indeed, quite a few of these firms were started by ex-employees of these HDD assemblers, who accumulated deep business or manufacturing process technology domain knowledge of the industry, before coming out to become component suppliers or service providers to the same or related industry. (For those of you who want to know more about this dynamic process of new firm formation in the HDD sector in Singapore in the 1980s and 1990s, you can consult the chapter I wrote on Singapore for a book on the globalization of the data storage industry published by Stanford Business Press in 2000 -- the book actually bears the title "From Silicon Valley to Singapore: Location and Competitive Advantage in the Hard Disk Drive Industry". )

This new firm spawning process is actually not that much different from the ways in which advanced firms in successive high tech industries in Silicon Valley have spawn the subsequent creation of new start-ups through the process fo employees leaving to become entrepreneurs -- whether it is Fairchild in Semiconductor, HP in electronic instrumentation, or Apple in personal computers. The one difference between what happened in Silicon Valley and Singapore's hdd industry is that, while the advanced firms in Silicon Valley were engaged in product innovation, those in Singapore's hdd industry were engaged primarily in manufacturing operations, albeit with some involvement in manufactruing process innovation. The employees in Singapore hdd industry thus learned primarily about manufacturing operations and process innovation, and the start-ups they created naturally drew on what they learned -- hence it is no surprise that their start-ups were concentrated in component production and assembly, process automation and contract assembly services, etc.

It is interesting to note that early stage financing has NOT been a major limiting factor to the creation of many of these hdd-related start-ups -- the main reasons being that there existed a critical mass of people who understood the industry, and the fact that there was a ready market for the products and services of these start-ups, which reduced the perceived risk of investing in such companies. Some of these start-ups were self-funded by the entrepreneurs themsevles and their friends who had accumulated savings as employees in the hdd firms; some of the funding came from former industry senior executives, other investment came from other business executives and professionals in related industries, and later, private equity funds and investment bankers who were familiar with the industry. The key point is that such investment were forthcoming from people who knew the industry, who knew the entrepreneurs, and who could assessed the risk because of their domain knowledge and people knowledge.

Fast forward to the 1990s and 2000's, we can witness a similar burst of Singapore-based start-ups in the offshore and marine services sectors -- with Keppel FELS and Sembawang Corp serving as the advanced firms that have become globally competitive (collectively they controlled more than 2/3 of the world's market for offshore platform construction), many such offshore and marine services firms were spawn, including quite a few that have IPOed in recent year, e.g. KS Energy, Swiber and Ezra. Again, the same process can be discerned -- knowledge gained from the advanced firms emboldened some of their employees and distributors to become entrepreneurs, and the ready market provided by these advanced firms for a wide range of services reduced the risks for such entrepreneurial entries.

The point is that, where there exists advanced firms, Singapore has been able to support healthy new firm formation and growth. It is only when entrepreneurs in Singapore try to start new ventures in sectors where Singapore does NOT already have some advanced firms and lead-users as anchors that they encounter difficulty in getting funded. It is NOT that Singapore has no high net-worth angel investors, or that such people are inherently risk adverse. It is because the entrepreneurs are trying to start companies in sectors that the existing angel investors do not understand, do not know the entrepreneurs, and cannot assess the risk competently.

In this sense, entrepreneurs in Singapore who are trying to do what Silicon Valley is best at -- starting new companies that pioneer new product innovation using cutting edge technology and targetting at lead-users -- are doing it in the wrong place. Singapore had produced some successful manufacturing firms because we were a major manufacturing base for some rather advanced manufacturing operations by global MNCs. But because Singapore had NOT been a base for advanced global MNCs to perform their product innovation activities, we had not been able to acquire much advanced know-how in product innovation. Unless and until a szable base of advanced firms and lead-users are carrying out their product innovation activities in Singapore, thereby enabling a sizable number of Singaporean engineers and managers to acquire such advanced know-how to become entrepreneurs and investors, it would continue to be difficult for product-innovation-based entrepreneurial start-ups to get started and funded in Singapore.

I would highlight two implications from the above observation. First, Singapore's entrepreneurial ecosystem is not uniformly weak or backward; there are sectors where Singapore's ecosystem may arguably be better than what can be found even in Silicon Valley. Just as Silicon Valley has a great ecosystem for, say, web 2.0 start-ups now because it already has advanced firms in web 2.0 and hence lots of people, including VCs and angel investors and entrepreneurs, who understand web2.0, Singapore has a great ecosystem for marine services start-ups for the same reasons. The key is to pick the right type of business to start in Singapore -- businesses that best leverage on the strength of Singapore's existing (and emerging) ecosystem. Some of my own recent angel investments have been guided by this perspective (more on this in future blogs...).

Second, entrepreneurial ecosystem is not static, but can evolve over time. In particular, public policy can play an important role in stimulating or accelerating the pace of change in certain directions. Thus, notwithstanding the difficulties in starting product-innovation-based new ventures in Singapore that I highlighted above, specific policy interventions, e.g. public co-funding schemes to reduce risk of angel investors, bringing in experienced mentors that have the relevant industry, business and technology knowledge, and public support scheme for early internationalization and cross-border fund-raising, can help nurture the beginning of some limited successes, which in turn will spawn more start-ups over time, in a virtuous cycle. This is something that my centre (NUS Entrepreneurship Centre) in NUS is trying to do for NUS-related spin-offs; again, more on this in some future blogs...

don't think out of the box... get out of the box!

Hardly a day passes without my hearing someone uttering the exhortation to "think out of the box". I am sure the folks who utter this cliche meant well -- surely it's good for us to become more creative in our thinking -- but I actually think that this exhortation can be counter-productive and in some contexts may in fact be down-right wrong. The problem with this "think-out-of-the-box" metaphor is that it encourages the belief that one can actually solve real world problems by sitting where one is -- one just needs to be able to think in clever and creative ways. While this imagery certainly appeals to our intellect, I believe a more appropriate metaphor for many of us, especially the intellectual type, is not so much to try to think out of the box, but to GET out of the box -- i.e. get out of our comfort zone and actually go down to the ground where the real action is, so that we can experience first-hand what the real problem is like, as opposed to what we IMAGINE it to be.

We already have too many smart bureaucrats who sit in their air-conditioned office to dream up clever policies or regulations that unfortunately don't work (or make things worse) in practice because their clever policies have omitted certain realities on the ground (for those of you living in Singapore, you may recall the recent incidence of the Land Transport Authority (LTA) coming up with new regulation on where taxi can stop that was well-intentioned but turned out to be impractical and had to be retracted -- would this has happened if the officers involved have actually gone to the ground themselves?). We already have too many smart business school professors sitting in their ivory towers writing clever papers that have little relevance or impact, because they don't bother to talk to the actual folks in industry (ok, some of my colleagues will kill me for saying this...). And yes, we already have too many smart entrepreneurs writing fancy business plans without first going out to observe or talk to potential customers about what their actual pain points are.

Too many wrong solutions are implemented because people imagine what the problem is, instead of being out there to personally experience and learn what the real problem is. What we need to exhort more is for people to get out to the real world to learn first-hand -- the creative thinking can come later, after you have a better grasp of what the real problem is. I particularly stress this point to young entrepreneurs that I'm advising -- by all means, do your homework to formulate your product strategies and develop your go-to-market plans carefully, but what is more important is to start engaging potential customers and to learn about what their real pain points are as early as you can -- unfortunately, very often this cannot be done effectively without actually launching a product into the market. You will get far more ideas about what to do next, when you have real feedback on a real product, than if you just talk about your product concept on paper -- the quality of the conversation is just not the same. The worst business plans are those that provide fanciful market segmentation analysis, but cannot name actual companies or persons that the entrepreneurs have personally talked with or observed about the specific needs, and how their proposed product are actually addressing such needs.

Don't get me wrong -- I'm not suggesting that we become constrained to the existing reality and become enslaved to working within the mold of conventional wisdom; indeed, a large part of achieving truly radical innovation is to upset the existing order with disruptive ideas, and to do this we do need maverick, out-of-the-box thinking. I do believe, though, that all innovation, to be successful, must solve some actual or latent user needs, and often these needs are not well articulated, so the best way to discover what they are is to be out there and observe how the users grapple with their problems in their natural context. In this regard, I believe we all can become better innovators and entrepreneurs if we learn to become more like anthropologists (one of the ten faces of innovation as identifed by IDEO's Tom Kelley). Afterall, discovering opportunities is at the heart of entrepreneurship, and the best way to discover opportunities is to become more observant about people's needs and desires.

So, if you have been thinking hard trying to discover the next great entrepreneurial opportunity, stop thinking and try getting out of your box first.